I have received several E-mails over the last few weeks that suggest that the economics…
Why Uber is not a progressive development
A few weeks ago, I was waiting for a flight at the airport and during a conversation with a person who often travels the same route and schedule that I use on a regular basis (we are now sort of ‘fellow travellers’ and share stories of delays, diverted flights etc), he asked me whether I use Uber. My reply was in the negative – I do not use the service and do not think it is a positive labour market development. He then said something like “but it is a flexible service and drivers can choose their hours”. To which I said something like “flexibility is just the latest buzz word for low-pay, casualised employment” except Uber takes that trend even further in the direction of capital. Uber is a replay of old models of worker exploitation jazzed up in Silicon Valley hype to appear to be ‘cool’. The ‘gig economy’ just layers additional disadvantages for workers and takes us back to the days following slavery. Progressive should avoid using the service for many reasons. There are also other issues relating to the commodification of our lives that also apply to services like Uber. Interestingly, a few weeks after that interchange, the Financial Times published an article (August 11, 2016) – Uber hitches a ride with car finance schemes – which reinforced my views on the scheme. And just yesterday (August 15, 2016), there was a very terse Letter to the Financial Times about this article – An economic model from the feudal age – which summarises why progressives should boycott this type of labour market trend.
I think my airport ‘friend’ must have been reading Uber’s homePage where you will see a flash car and a well-heeled female standing under the header and sub-heading
Uber needs partners like you.
Drive with Uber and earn great money as an independent contractor. Get paid weekly just for helping our community of riders get rides around town. Be your own boss and get paid in fares for driving on your own schedule.
Got a car? Turn it into a money machine. The city is buzzing and Uber makes it easy for you to cash in on the action. Plus, you’ve already got everything you need to get started.
Well even if you don’t have a car, Uber will get you one as long as you commit to a credit arrangement.
The reality of Uber and schemes like it is quite different.
The standard arguments against Uber including how it evades regulations that standard taxi services are forced to operate under apply also to my distaste for Uber, but I won’t go into them here.
Essentially, I don’t think it is fair to existing drivers who work very long hours at close to minimum hourly pay in the hope that they will enjoy a capital gain on the ‘licence’ they bought to enter the sector. These licences are very expensive because of the past regulated supply.
Uber is destroying the retirement pensions (sale of the licences) of thousands of workers. I don’t support that approach. The government should regulate Uber in the same way that it regulates the existing taxi services.
But that is not what this blog is about.
I also won’t address the claims that Uber has sneaky intelligence built into its app to work out how much battery life a person has on their mobile phone – leading to so-called ‘surge prices’ when they think someone is becoming more desperate for a route home. Please see account (May 23, 2016) – How Uber is able to exploit our desperation – for more on that.
The Uber conversation was interesting because over the last month I have been reading about sharecropping as a model of rural development.
This reading is part of a section of the book I am soon to complete on the how the Left has been duped into becoming neo-liberals.
In one part of the book, I am tracing how the advanced nations developed – which historically has been the antithesis of how neo-liberal institutions such as the World Bank and the IMF expect (and coerce) poor modern nations to develop.
So the anti-government model used by these institutions to enslave nations into debt and massive real resource plundering, while at the same time destroying the subsistance capacities that these nations relied on to feed their populations, was never remotely the approach taken by the now rich nations.
If they had followed the IMF model, they too, would still be wallowing in poverty and desperation.
It was in that context that I have been reading a lot about agricultural reform (and sharecropping).
Sharecropping is a feudal hangover and was a highly exploitative system of agricultural production. Uber looks a lot like sharecropping to me.
The Letter to the FT editor (cited in the Introduction) stated it this way:
The $68bn market valuation of Uber (“Uber recruits hitch ride on lending schemes”, August 12) can only be based on a cynical assumption that the company will be allowed to expand its drove of cyber serfs. It is nothing less than 21st century share cropping that preys on the gullible, the ignorant or the desperate. An economic model that is based on workers providing the capital for their own tools and bearing the risk of individual business failure while delivering profits to the owners of an algorithm is as sure a method of returning income distribution to the feudal age as anyone could devise.
The FT article that the Letter was referring to (also cited in the Introduction) outlines how Uber is extending loans to would be drivers to expand their network and then deducting payments from the drivers’ earnings.
We read that these credit lines :
… are part of an expanding programme to get vehicles into the hands of drivers – often by offering them loans or car leases whose cost will be taken straight out of their wages.
Further, in the same way that the so-called pay day lenders offer instant cash at, often exhorbitant interest rates, to workers short of cash, Uber is starting to provide advances (loans) to new drivers.
An Uber spokesperson told the FT that:
If somebody cannot pay the monthly amount, they can simply return the car.
As that ‘somebody’ enters the unemployment queue.
The “credit facility” was “arranged by Goldman Sachs and funded by more than half a dozen Wall Street banks” – so that should tell you something about the scheme.
The article reveals some of the terms that the credit arrangements offer. Loan repayments are onerous.
We read that the predatory lending schemes that Uber uses to expand its network of drivers are “an attempt by Uber to bind drivers to the company for the duration of the loans … [it] … makes it impossible for you to leave your job before it is paid off.”
A moment’s thought leads to the conclusion that an official from the National Employment Law Project in the US (Ms Smith) draws:
Uber’s vehicle financing … [is] … an effort to foist capital costs on to drivers. “Responsible companies pay for their own equipment and tools,” says Ms Smith. “Uber has shifted that cost and risk on to drivers, who are making poverty-level wages.”
Another commentator calls it a “company store model”.
The ‘Company’ hypes itself up talking about ‘flexibility’ and ‘choice’ for the drivers.
Flexibility and choice in this context mean that drivers are small business absorbing all the risk of the venture, providing their own worktools (sometimes under onerous credit conditions) and if that all fails – they have the flexibility to become impoverished and unemployed.
Meanwhile all the cool cat consumers are busy pressing their iPhone apps in search of the next fare!
So 21st century share cropping and company town – Uber has the worst of both.
Sharecropping is a long-practised type of agriculture that stems out of a feudal mentality.
I don’t wish to write a lot here about the plethora of arrangements that have historically been terms ‘sharecropping’.
While still prevalent in nations such as India and Pakistan, it is a well-known arrangement as a result of the way it was deployed after the American Civil War to transition from slavery to some other form of agricultural production, which was little more than implicit ‘slavery’.
The essential characteristics involve some sort of lease to a farmer of land owned by someone else. In the post Civil War period, the slavers leased back the land to the old slaves once emancipation had been achieved. This was, in part, to avoid a major labour supply shortage.
It was much easier for the former slave owners to avoid paying wages and instead create a new class of independent producers dependent on land leases provided by the former slave owners.
Roger Ransome and Richard Sutch analysed the sharecropping system in their excellent 1972 historical article (see reference) and concluded that (p.642):
Sharecropping allowed the exploitation of the small farmer by the monopolistic financial structure dominated by the local merchant. Unable to obtain alternative sources of credit for supplies he needed, the small farmer was forced to pledge his future crop as a lien against credit advanced for the growing season.
[Reference: Roger L. Ransom, R.L. and Sutch, R. (1972) ‘Debt Peonage in the Cotton South After the Civil War’, The Journal of Economic History, 32:3, 641-669. JSTOR Link]
The so-called Crop Lien System – which “was a credit system that became widely used by cotton farmers in the United States in the South from the 1860s to the 1930” reminds me closely of the way that Uber is tying up its workforce.
Under the crop lien credit system, sharecroppers “obtained supplies and food on credit from local merchants … [who] … held a lien on the cotton crop and the merchants and landowners were the first ones paid from its sale.”
If nothing was left over after the payments were made then tough luck.
The land was owned by the former slave owner (just as Uber owns its ‘algorithm’ and IT structures) and the risk of the enterprise falls back onto the sharecropper (Uber driver).
The crop lien system also tied the sharecropper to a particular farmer.
Ransom and Sutch found that (p.642):
The crop lien bound the farmer to the merchant and restricted his options to buy elsewhere or dispose of his crop in the most advantageous manner. Through use of his monopoly power, the merchant was able to insist that the farmer concentrate on the production of cotton at the sacrifice of food for home consumption, thereby forcing the farmer to buy his provisions from the merchant. The credit prices charged for these supplies were exorbitant, reflecting not only the local merchant’s inefficiency, but his exploitative powers as the sole source of rural credit.
More and more of a person’s alternative ‘free’ time becomes absorbed under the Uber model if they are struggling to make ends meet and repay the credit line.
The US National Employment Law Project spokesperson (cited above) told the FT that the Uber credit line was:
… predatory lending, plain and simple … It is a car lease that comes from your employer and makes it impossible for you to leave your job before it is paid off.
Same old.
Ransom and Sutch quote Charles Otken who in 1894 summarised the experiences with sharecropping in this way:
This condition of affairs in the South introduced a credit system whose tremendous evils and exorbitant exactions have brought poverty and bankruptcy to thousands of families. As a policy, it is vindictive in its subtle sophistry; as a system, it has crushed out all independence and reduced its victims to a coarse species of servile slavery.
They knew how to write in those days!
We can be sure that the Wall Street banksters will dress up their credit scheme for Uber drivers in some fancy terminology – that invokes ‘cool’. But you can also be sure that the conditions will not favour the drivers. Same old.
The Uber conversation also reminded me of an excellent book I read in the early 1980s by Roy Kriegler –
Working for the company : work and control in the Whyalla shipyard (published in Melbourne by Oxford University Press).
‘Working for the Company’ was the result of Kriegler’s PhD research and he used an innovative technique to gather his data. He went and worked undercover at the BHP shipyards in the regional South Australian town of Whyalla. His book describes his experiences as a worker faced with hostile climatic conditions (hot), regional cultures (isolated) and a pernicious management (old style oppressors).
Whyalla was a 400 kilometre drive from the South Australian capital of Adelaide across “hot, desolate plains” (out into the South Australian desert).
Of Whyalla, Kriegler writes (p.1)
It is difficult to imagine the bitter disappointment that British and European immigrants must feel when they first see Whyalla, where they elected to settle on account of the job opportunities and favourable impressions conveyed to them by alluring brochures and over-zealous company and government officials. They come from the lush, green hill-sides of Europe, from villages bathed in mediaeval history, to a barren, windswept concrete and corrugated-iron city bathed, not in history, but in a fine coating of iron ore dust.
Whyalla was a one-company town and was developed when “BHP acquired the leases covering the iron ore deposits at Iron Knob and Iron Monarch in the Middleback Ranges” in 1897.
With massive public subsidies (yes, corporate welfare was alive and well there too) and ridiculous concessions (such as, BHP would be free “to discharge effluent into the environment”), the town grew.
The book describes how (p.5):
With the exception of a primary school, a post office, two policemen and their shared bicycle, almost everything then was owned or supplied by the Company … essential services … roads … electricity … supply of water …
BHP even “held the licence over the cemetry” so that “people could not even die and be buried except under the auspices of the Company” (p.6).
As time passed, the government started to provide massive subsidies by assuming responsibility for essential services, building houses and roads, and other communal infrastructure (airport, rail, schools etc).
But the Company remained dominant and exploited that dominance at the expense of the work force.
Some of the graphic narrative he provided has stuck with me more than 35 years since I read the book, including his description of the air conditioned bosses cafeteria juxtaposed against the tin shed the workers sat in to eat their lunches.
In another account, he writes (p.128):
During my first week at the Shipyard, I strolled into a toilet block which was spotlessly clean and I recall how pleased I was that the workmen’s toilets were of such a high standard. The next time that I returned to use these amenities, I was in more of a hurry and bumped my forehead against the door because I didn’t expect it to be locked. When I raised my head to look at the protruding object that had struck me, I noticed that it was the corner of a sign which read ‘staff only’. I was disappointed when I eventually found the workmen’s toilets. They were old and in a filthy condition and a large ‘U’ shape had been cut out of the toilet doors, presumably to discourage loafing. Staff, I discovered later were issued with a key to use their own toilets.
The book also describes the complex arrangements that entrapped the workers who often moved to the remote town for employment. The company had a close relationship with the major retail stores in the town.
They encouraged the workers to take on extended credit (hire purchase etc) to furnish houses etc at rather exploitative terms, which made it hard for workers to be mobile between employers or towns. BHP managers would actually take workers to the shops to assist them in signing credit forms etc.
The workers were then enslaved with onerous credit arrangements and risked losing everything if they quit the company.
The book details a number of other ways in which the Company manipulated and controlled workers to ensure they could capture as much surplus value from the workers as possible.
And, after years of corporate welfare assistance from both State and Federal governments, BHP closed the shipyard associated with the steel works in Whyalla in 1978. 1800 workers lost their jobs as the yards were closed down.
Kriegler wrote that the closure was the “as a result of a lack of orders, rising costs, poor management and a lack of capital investment by the Company” (p.10).
Typical story. The Company moved on to find other means of exploitation to profit from while the workers left behind had few opportunities.
Uber is a bit like that, which is why I dislike the model.
I also read another interesting article at the weekend (August 13, 2016) – Commodification – by Branko Milanovic (a former World Bank economist who has written extensively about inequality.
His thesis is that any movement towards a more cooperative model of economic behaviour (eschewing “single-minded profit maximizing”) will be constrained by “the increasing commodification of many activities”.
This is not a new theme.
In 1974, the great American author and activist – Harry Braverman – published his magnificent book – Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century (New York, Monthly Review Press, 1974) – which traced the way in which Capitalism was impacting on the design of work in America.
He examined what he termed his “de-skilling” hypothesis where capital systematically restructured labour processes to enhance their control in order to extract higher profits.
He also proposed that commodification was becoming generalised under Capitalism – extending into more and more areas of our ‘social’ lives.
Progressively, these “labour processes” (market-values) subsume our whole lives – sport, leisure, learning, family – the lot.
Everything becomes a capitalist surplus-creating process.
The mass consumption era morphed into something even more comprehensive where aspects of our lives that were previously consider ‘non work’ (which meant non capitalist) became markets, with commodities supplied to support. The technological gadget revolution has accelerated this process.
If we judge all human endeavour and activity by whether they are of value in a sense that we judge private profit making then we will limit our potential and our happiness.
Harry Braverman clearly understood that the capitalist profit-seeking machine would seek to impose its constructs on all aspects of human activity. Even those activities that were previously part of our non-working lives – our lives away from the oppression of work.
The aim was to make everything ‘work’ by which a special meaning was attached – that activity that allowed private capital to make profits and accumulate more capital.
Branko Milanovic argues in a similar fashion:
The most obvious case is commodification of activities that used to be conducted within extended families and then, as we became richer and more individualistic within nuclear families. Cooking has now become out-sourced and families often do not eat meals together. Cleaning and child-rearing have become more commercialized than before or ever.
He considers the “gig economy further commercializes either our free time or things we own”.
This is where Uber comes in.
He writes:
Uber was created precisely on the use of free time: limo drives had extra time that they could use to drive people around and make money. So, now anybody who has some free time can ‘sell’ it by working for a taxi company or delivering pizza. A portion of the leisure time that we could not commercialize (simply because it was so short and discrete) has now become marketable.
And the problem:
The problem with this kind of commodification and flexibilization is that it undermines human relations and trust that are needed for the smooth functioning of an economy.
Continuity in our working lives becomes a thing of the past. We become ruled by an iPhone app and workers come in and out of the market as their taxi business rises then falls on low pay and fluctuating demand.
Co-operation is undermined by this lack of continuity.
It is worth thinking about.
Conclusion
The problem with consumers thinking it is ‘cool’ to use Uber-type services is that if that trend continues their lives as workers will become more difficult.
That is the problem we all face in our dual faces (consumers and workers). What might seem to be a better service or a cheaper product for the consumer may carry the cost for the workers producing or providing the output.
If we think Uber represents the future of work then we are also agreeing that we want insecure, low-paid work without the usual entitlements, which have defined progress, to become the norm where the risk of enterprise is borne by the worker and the fixed capital to support the service becomes the workers’ responsibility.
It is not a vision of a progressive future at all as far as I can see.
Sharecropping declined because it undermined the prosperity of the worker in favour of the landowner and society moved on to provide better worker protections. Uber and its ilk look very similar to the early days of sharecropping, Silicon Valley hype notwithstanding.
The Wall Street banksters have an uncanny habit of shifting the costs onto workers and taking very handsome returns for themselves.
That is enough for today!
(c) Copyright 2016 William Mitchell. All Rights Reserved.
All roads lead back to the bankers in everything that goes wrong in this world.
How did that come about? I’ll bet it wasn’t quite so simple as that phrase makes it seem. It might help to know how we can “move on” in the current situation.
The US is similarly very fond of franchise agreements. I’ve looked at a few of those over the year and I have yet to see one that isn’t similarly a form of indentured slavery.
Certainly commercial leases in the UK are the worst sort of draconian indenture. Once you sign up to one, you are responsible for it for the duration – even if you sell it on to somebody else. It’s quite astonishing that we allow such a contract to exist. If you want to encourage nascent businesses then being able to hand back the lease and terminate it at will reduces the risk for the business and the individuals forming it – and the landlords lose out a little.
Arguably domestic mortgages are similar. The dark humour at the Halifax was that the deed store was actually where they stored the souls of the mortgagees – to be returned after 25 years of hard labour.
Uber is just the latest in a line of indenture mechanisms of varying degrees of brutality. We haven’t really determined where the socially acceptable line is.
A client of mine, who had a very successful coach business, bought a taxi firm and asked me to look at how it could be turned from loss-making to profitability. After studying the accounts I could not see how it could possibly work at the fares charged. It would not be possible to increase the fares because of local competition, and the drivers were being paid minimum wage. Eventually the new owner had no alternative but to put the company into liquidation. And this was a company that owned all its vehicles outright. If you had to finance the vehicles and pay royalities to a franchisor such as Uber it would be even worse.
I shall certainly take your advice and avoid Uber.
Similarly, in the UK, we have the pub business, a large amount of which is owned by breweries and the pubs leased to publicans. The publicans have to buy their beer at inflated prices exclusively from the brewery as part of the contract in exchange for a low rent. Most of these operations are hard-pushed to make a reasonable income and, of course, pubs are closing down at an accelerating rate. The breweries then sell off the properties, and some brewing companies are really just property developers.
I see a time in the future (maybe already here) when there is one global company that owns all production and all the workers can only be employed by that company and rent their house from it or obtain a mortgage from it. The ultimate sharecropping.
G’day Bill. I agree with your sentiments but possibly Uber is not the best example. Having worked as a taxi driver myself and having a friend who owned both a plate and the car – it became obvious that the business of trading in plates was killing the industry. It was everybody except the drivers who were making a killing out of the taxi trade. Uber was nothing more than a disaster waiting to happen. Of course, the plate owners are now up to there necks in it, the drivers are facing ruin and the banks have taken all the profit over the years except at this time you can’t blame the banks because plate owners wanted the cash. Blind Freddy could have seen this coming 25 years ago – but of course regulators have sat on their hands as usual. As per usual, panic has broken out as to what should be done – the answer of course not to the liking of state governments – pay out the plate owners who should have seen this coming anyway.
Uber is one of the last attempts at creating profit where there is none. How do you create profit when it’s impossible? Very simple: exploitation and “slavery” (of various degrees).
Uber and many of the new “tech” (glorified webpages tbh) ventures (and also of the “sharing economy”) aren’t anything else that profiting from economies of scale assuming a monopoly or oligopoly position on the market while removing all the others intermediaries from the market.
Removing intermediaries is always good, but when you replace them with an even larger intermediary which holds an information advantage over all competitors, consumers, and employees, you are just creating a tyrant who is free to extract rents from everybody else.
In a desperate environment with high unemployment and under-employment, or poor quality of employment, decaying productivity etc. people will “happily” enslave themselves for the mere illusion of income (in fact what is happening is that there is an indirect transfer of liabilities and costs from the balance sheet of the corporation to the workers, while the corporation happens to keep most of the profits, free of risk and operating costs).
Is the last on capitalist scamming in a world with low to no real growth.
Go to Panama and get a taxi. Your opinion about Uber may change quite a lot…
Uber is feudal for sure.but the taxi industry also struck me feudal as well.You have drivers renting plates from families which one 100’s of plates and live off the passive income.If you want to buy one?prices have inflated so much that’ll you’ll be paying most of the earnings over to banks for the rest of your career. Makes more sense to me for the taxi medallion or plate to be rented from the council/local authority.The local council regulates the driver’s and limits the amount of taxi drivers so that the regulated taxi drivers have enough demand to provide them with a living.I always thought unlicensed taxi driving was illegal anyway so I don’t understand how uber has been getting away with this legally-around the world.
“Go to Panama and get a taxi. Your opinion about Uber may change quite a lot…”
Panama. The Center of the Universe.
Maybe open-source solutions like Craigslist are possible to compete with the Ubers of the World. But that doesn’t solve the problem of the destruction of good-paying jobs.
“Essentially, I don’t think it is fair to existing drivers who work very long hours at close to minimum hourly pay in the hope that they will enjoy a capital gain on the ‘licence’ they bought to enter the sector. These licences are very expensive because of the past regulated supply.”
No sympathy. The only reason why taxi licences had value was because they restricted supply, raised artificial barriers to entry, thus pushing up prices for passengers and destroying jobs etc. If the government realises its mistake and changes the rules, why on earth would they compensate the people who have unfairly benefitted in the past?
I agree with the other criticisms of Uber though.
I gave the Panama example because I believe it sums up a good point.
There the taxi service is extremely poor. They drive in an extreme dangerous way, may drop you in the middle of the city because they believe it isn’t worth it to leave you at you destination, and they will try to charge 10 times the price for some random reason. That’s not the excpetion, that’s the rule.
Everyone knows how bad the taxi service is, but there was never a solution. Maybe people were unable to pressure their political leaders, maybe the political leaders were incompetent, and maybe a lot of interest groups did their job to halt any kind of progress. I don’t know. But the fact is that the taxi service always had a very poor quality.
Then Uber came and you have a good quality alternative. Don’t see how it can be bad. It’s more expensive than a taxi, but maybe that’s the price you have to pay to don’t get killed in a car accident. Or the price you have to pay to enjoy a more quality service.
Taxi drives that are now unable to get passengers because of Uber could maybe be employed in some mmt job guarantee program to achieve public purpose (away from any sort of driving activity because that would be a disaster), and that would be progressive. To try to keep them driving because they have a license is probably worse off for the entire society.
The ultimate endgoal for Uber will be autonomous taxis. Thus negating the need for drivers entirely – will their prices drop? That’s the big question. Uber is a data company, the same way the Google was always about Artificial Intelligence. This collection of the “new oil” will place Uber well into a technologically focused future (except maybe in China). Uber will know where to place cars, where to send them, when to restrict them etc However, the technology that Uber is built on is not something that they can hold on to, sure they can capitalise up the whazoo being the frontrunner etc but over time their lead will diminish. Build an Uber-like system that allows passengers to tip drivers as see driver flock to that one. Taxi drivers are themselves using Uber. Why? Because its system works better than the one they currently have. This frictionless service is also part of why consumers like it. I think eventually more systems will compete.
I’ll echo Bob and say Uber only succeeds because the taxi industry is a dinosaur – and if you don’t think taxi companies pressure drivers to take on car loans individually, you’re dreaming. It’s prevalent in Australia and likely in most places around the world (I worked at one of the big car finance companies and know first-hand) so nothing new there, Uber just tell the truth about it.
Hi Prof,
I very much enjoyed your recent talk at trades hall.
“If we judge all human endeavours and activity by
whether they are of value in a sense that we judge
private profit making then we limit our potential and
our happiness.”
Perhaps Heidegger’s warning about humans being
reduced to a standing reserve to be efficiently
optimised was correct.
https://en.m.wikipedia.org/wiki/The_Question_Concerning_Technology
Bill,
Sharecropping is not intrinsically exploitative. It lowers the barriers for entry into farming, as for new farmers it’s a practical alternative to taking on lots of debt to buy land. You could sensibly argue, as Ricardo did, for a broad based land tax to prevent the land getting that expensive in the first place, but in practice its implementation would still require a lot of the land’s value to be retained by its owner.
Of course historically, there have been a lot of exploitative sharecropping contracts. But that’s not the fault of sharecropping; it’s the result of economic conditions where no better alternative was available to many people.
The taxi industry too has been in the situation of no better alternative available. The number of taxis was artificially restricted in attempt to make it more lucrative for drivers. Instead it’s resulted in a secondary market for taxi plates – so there’s a higher barrier to entry and drivers are no better off until they quit.
Uber has improved the situation by providing an alternative to that. There could be a case for compensating existing taxi drivers, but that’s a matter for the government. Uber is not to blame.
And far from trapping its drivers with onerous credit arrangements, it’s providing its customers with alternative to existing commercial credit arrangements (which they’re still free to use). They deserve kudos for providing an alternative. You seem to be arguing the absurd position that Uber are exploiting workers because they’re offering many drivers a better deal than the banks!
Commodification and flexibilization are necessary features of the taxi and hire car industry, which is there to serve a fluctuating demand. Uber improves its ability to respond to that demand. If drivers don’t like it, maybe they should try driving buses instead.
BTW Whyalla wasn’t just a town. It was the second biggest city in SA for much of the 20th century!
I want to help clear up some misunderstandings about the Australian taxi industry.
You said “.. I don’t think it is fair to existing drivers who work very long hours at close to minimum
hourly pay in the hope that they will enjoy a capital gain on the ‘licence’ they bought to enter the
sector. These licences are very expensive because of the past regulated supply.”
Almost all of this is true EXCEPT the part about enjoying a capital gain on the ‘licence’. Virtually
none of Australia’s taxi drivers own their own taxi “plates”, most work for a network or owner who has
invested over $500,000 for those plates. Can you imagine any uni student or part-time employee who
could afford that investment? Can you imagine investing $500k for the benefit of earning a poverty-
level income?
Like most people, you seem to have confused the taxi driver “licence” fee (under $200/year) with the
taxi “plates”. And almost no taxi drivers earn a “wage” – their income is a straight split of income
from fares with the plate’s owner – typically on a 50:50 basis. Is this any different to the
“sharecropping” you are concered about with Uber?
I think (and hope) that the introduction of competition from Uber may put an end to this huge rip-off
of both taxi-drivers and the general public. The guilty parties are the state governments who scalp
investors for the exorbitant fees for plates. Then they multiply this damage by putting strict limits
on the number of licences available, which provides some guarantee of returns to the plates’ owners.
Then they set the fares.
A substantial reduction in the fee for plates would allow a substantial reduction in taxi fares. This
would provide greater income for drivers as more people could afford to use their services. As it is,
most drivers sit around in cab ranks, airports and shopping centres for most of their shift – everyone
would be happier if they were helping to move people around.
Bill, as usual, your goals and intentions are of the highest order and I hope this additional information is of some value.
In many developed places the conditions for taxi drivers are not that much different between the ordinary “regulated” taxi and Uber.
One could probably make an “mac” index on number of taxis to see the condition of the labour market. Taxi have a fairly low entering threshold and the tighter labour market the more taxis. NYC regulated Taxi in the early 30s the streets was besieged with drivers that literally did fight for customers.
In Sweden the “reformed” labour market have those who are inside the old system with some conditions and union mandated minimum wage at the bottom, then there is those outside this, like different kind of service sectors where immigrant assemble. Like taxi where your salary is straight commission based as a percent of receipts. The hierarchy is a call center with logotype on the cars owned by minor haulers that in turn maybe have a few cars and hired drivers.
The call center have mainly fixed fee on the haulers so the more cars on the streets the better, if they have customers is not a primary issue.
The poor bugger that gone in to the trap of buying a car and have to operate it himself have to sit in the car for most of the 13 hours allowed per any given 24h period (the 11 h rest can be divide in minimum one 8h continues + the rest, 24/7 365 days a year. Normal for driver is probably no less than +230h/month.
The problem isn’t Uber or others that take advantage of drivers in a vulnerable position. The problem is solely a neoliberal system that with political means deliberately create mass unemployment. Uber is no worse than other vultures on this market where the most vulnerable is made prey (not least by those how call them self Socialdemocrats/Labour) for these hyenas.
And BTW what’s so special about Uber, any taxi call center has apps these days. Maybe a bit slow some places to catch on. But Uber is no special innovation just an normal development in the connected smart phone era. I don’t believe they still make any money, haven’t seen the latest. Belive they still have insanely stock market value on meager turn around and then their actual turnaround is only about 20 % of the gross.
Some funny images of Hong Kong taxis, that are CONNECTED:
http://triptohongkong.com/wp-content/uploads/2015/10/hong-kong-taxi-driver-phone.png
https://i.kinja-img.com/gawker-media/image/upload/s–ciOLeFHS–/c_fit,fl_progressive,q_80,w_636/1971lq30ppd99jpg.jpg
uber is fundamentally a deflationary force in the market, and if its competitor aren’t on a level playing field , the solution isn’t to ban uber, but to get rid of the overhead the government creates for ubers competitors,
and for its competitors to fight back with better dynamic price forecasting.
googlenomics and transparent market pricing means there is nowhere to hide, and the days of market behaviour and pricing that is unresponsive to demand fluctuations are on their way out.
sadly this is the way of the world, and I should no , since I am a revenue management consultant, and in a market where may be 70% of competitors don’t actually understand how to leverage these concepts, I have made a killing for my clients who have truly embraced these ideas .
the taxi service and the government needs to catch up with the modern customer driven dynamic pricing world.
unfortunately , it will most likely be a race to the bottom, and those with the deepest pockets will survive, and that may not be a socially desirable outcome, but such is life
Only the paranoid can keep an aggregate from optimally provisioning itself. Scam Uber-Alles
I just heard back from some anonymous people actually working (or interviewing) at Uber.
(it’s both worse than you thought, Bill, and the same-old, same-old; at heart, a Fallacy of Scale)
https://plus.google.com/104140272098689841413/posts/AVLmWMpUJue
The moral for this story came much earlier than anticipated.
From today’s Sydney Morning Herald (quoting The Washington Post)
‘Beginning this month, the ride-sharing company will begin deploying self-driving cars – equipped with cameras, lasers and GPS systems – to pick up passengers in downtown Pittsburgh, Bloomberg Businessweek reports. The custom Volvo SUVs will offer free introductory rides and, at least for now, be supervised by engineers in the driver’s seat. The idea, the company says, is to eventually replace human drivers with automated systems. The fleet of 100 new vehicles, will come with tablets in the back seats to tell customers what’s happening and to discourage them from interacting with their drivers.
“The goal is to wean us off of having drivers in the car, so we don’t want the public talking to our safety drivers,” Travis Krikorian, Uber’s co-founder and chief executive, told Businessweek.’
I think that at some point of time the engineers will be sacked, too. The holy grail of Artificial Intelligence is to get a machine to replace itself and build other machines. While still impossible today, this can obviously happen in the future. The so-called capital deepening will then take its full course, leaving capital owners (owners of the robots) without any workers. While the concept may look tempting to neoclassical economists, it is quite interesting how the real world will look like then.
From the article: ‘In the long run, Kalanick says, prices will fall so low that the per-mile cost of travel, even for long trips in rural areas, will be cheaper in a driverless Uber than in a private car. “That could be seen as a threat,” says Volvo Cars CEO Hakan Samuelsson. “We see it as an opportunity.”‘
The game is about getting rich. But there is a hard limit. I can imagine a single owner of everything on the Earth, a scion of Adolf Hitler, Rupert Murdoch, Koch Brothers, Bill Gates, Josef Stalin, Genghis Khan and Mark Zuckerberg (Kalanick’s genes will be eliminated in the 13th round of the game) and 100 billion of plebs, living in holes from guaranteed income and looked after in their 2×3 metres cells by machines belonging to the Single Owner of the Capital. Living on the surface of the Earth belonging to the Sole Owner or even trespassing will be forbidden because would violate privacy rights and mess up with the landscape. Anyway there will be drones hovering over the whole surface and throwing napalm on whoever dares to say or attempt to do anything against The Sole Owner. Sounds ridiculous? The current course of the technological revolution in the hands of neoliberal sociopaths “maximising shareholder’s value” is equally ridiculous to me.
(Obviously it is also quite possible that Uber itself is just a clever Ponzi scheme to extract money from the investors and the whole thing will crash and burn in a few months time – but the threat that someone is up to the gig remains. I am starting to believe that Chinese Communist Party is actually less evil.)
Does Uber understand that in most places taxi drivers already is one of the most exploited groups in society. And where they have been relatively protected like London and NYC it already before Uber had been inroads with competing taxi cars that don’t go under the old established regulated type.
E.g. in Sweden productivity in taxi is already extremely low. In the southern immigrant town of Malmo they are competing with public bus transport. At any train or airport there is an abundance of cabs, why bother with an app, or if your from the city it’s just as easy to call the easy to remember phone numbers, it’s much easier than tapping and writing in an app. And they also have apps. Can’t see that Uber could prize compete with that market, a market that is subsidized with gov wage subsides for immigrants and overall an shady business that cheat on taxes.
But the Uber fee is in large no different from the fees that existing call center takes.
But hipsters think it’s so “cool” to use an app. But I can’t see any productivity improvement with Uber. I get the feeling of people who spend lot of time as guests on restaurants and think that must bee a cool business and want to start theire own not understanding that is totally different ball game to be a guest and being those who supply the service.
BTW
Are MMT:ers Luddites?
Productivity improvements should be avoided to keep jobs?
Uber are placing their brand in good position to pioneer driverless taxis.
Built let’s face facts ,driverless cars mean the end of driving jobs and taxis will
no doubt be forerunners to a general trend.
Technology which does not need human operators is a completely different ball game
than the industrial revolution which relied on human operators.